Introduction

Introduction

No one could have predicted that the turning point would come so soon.

Recently, I've been pondering over one question: "How should we evaluate the Chinese auto market this year?"

Perhaps, in some people's eyes, the entire market is filled with vicious competition; perhaps, in some people's eyes, the entire market is inundated with junk traffic; perhaps, in some people's eyes, the entire market has been shrouded by a relentless "price war" showing no signs of abating.

In any case, the proportion of negative opinions far outweighs the positive ones.

However, in my opinion, this is only a partial reflection of the ever-advancing Chinese auto market. Looking at a broader perspective, the entire market is undoubtedly creating a brand-new milestone and node, where new energy vehicles have truly taken the lead.

In other words, whether acknowledged or not, electric vehicles have truly triumphed over gasoline vehicles, and as this wave of "flood" intensifies, no one can stop it.

As the most persuasive argument, the retail penetration rate of new energy vehicles reaching 51.1% in July has already proven much. Little did people know that in the just-concluded August, combined with the spoilers from the China Passenger Car Association, this highly significant achievement will further rise to 53.2%.

This inevitably reminds me of the beginning of this year, when Wang Chuanfu, Chairman of BYD, made his prediction that "the monthly penetration rate of new energy vehicles will surely exceed 50%."

Instantly, this prediction met with skepticism from many. Standing at that juncture, while the share of gasoline vehicles continued to shrink, they still held a certain leading edge, as the saying goes, "a starved camel is bigger than a horse." However, no one could have anticipated that the turning point would come so soon.

In the following sections, I will seize this opportunity to share some of my judgments.

Firstly, gasoline vehicles will not "disappear" from the Chinese auto market, but will degenerate to a very small share.

During NIO's second-quarter earnings call, Li Bin predicted that "in about two years, the retail penetration rate of new energy vehicles will climb to 80%." I, however, am even more convinced that it will reach 90% or even higher.

The fundamental reason lies in the comprehensive substitution of gasoline vehicles by electric vehicles across various segments. From top-of-the-line supercars costing tens of millions to budget-friendly commuter cars, they are all engaged in the same endeavor. Once this ripple effect takes hold, the changes it brings will be revolutionary.

Gasoline vehicles may only account for 10% of the future market share.

Secondly, amidst the chaos, plug-in hybrids may surpass pure electric vehicles.

In fact, examining the sales composition of new energy vehicles in a single month this year, range-extended electric vehicles have seen the fastest growth, followed by true plug-in hybrids, while pure electric vehicles have encountered significant bottlenecks in their growth trajectory.

If we classify the former two categories as "plug-in hybrids" in a broad sense, they are even showing signs of competing head-to-head with pure electric vehicles in terms of market share. Facing such results, one can only say, "This is the will of the people."

For most users who are just starting to embrace new energy vehicles, "plug-in hybrids" are their current destination. After all, the usage environment of the Chinese auto market is too complex, necessitating a diverse range of demands.

Especially as stubborn automakers, facing the prevailing trend, are forced to switch sides despite their initial reluctance, it becomes increasingly apparent that "plug-in hybrids" are becoming unstoppable.

By next year, when "plug-in hybrids" adopt larger-capacity batteries with faster charging speeds and higher discharge rates, as well as further optimized fuel consumption and power output under low battery conditions, pure electric vehicles will find themselves in an awkward position.

By then, it remains uncertain who will emerge victorious in terms of sales.

Furthermore, the landscape of the Chinese auto market is largely set.

Last month, at the Xpeng MONA M03 launch event, He Xiaopeng, who has gradually grasped the essence of "Lei's Philosophy," said, "In the next ten years, there may be only seven mainstream Chinese automotive brands left."

While such a prediction with a certain degree of "exaggeration" and a far-reaching outlook may not resonate with everyone, it is objectively rational to say that the era of new energy vehicles will not be as diverse as that of gasoline vehicles. The increasing homogeneity of products has destined only highly efficient giants to emerge victorious.

This year, as latecomers like HiPhi collapsed suddenly and frontrunners like BYD amassed even greater advantages, they gradually validated a truth: "The pecking order is being rapidly established."

Wang Chuanfu's words ring true: "This is an era of fast fish eating slow fish, not big fish eating small fish. If automakers don't surge ahead in the next 3-5 years, they will lose their chance." Similarly, these are not mere words.

As for who will ultimately remain at the table, the list will only be selected from the auto manufacturers that are currently sprinting ahead with all their might.

Lastly, the counterattack of joint ventures will be fiercer than expected.

Currently, there is a prevailing sentiment of pessimism towards them: "In the current gunfight of the Chinese auto market, the first to be threatened are the unacclimatized French brands, followed by the cost-effective Korean and American brands, and then the Japanese brands that prioritize economy and low consumption will encounter significant troubles. While the German brands, thanks to the presence of BBA and Volkswagen, possess the thickest lifeblood, they are far from their former glory."

The reality seems to confirm this assessment.

However, after attending the recently concluded Chengdu Auto Show, when Fu Qiang, Executive Vice President of Sales and Marketing at SAIC Volkswagen, directly targeted BYD, lambasting that its plug-in hybrid share would decline from the current 30% to 10%.

From this one instance, it becomes immediately clear that the counterattack of joint ventures has quietly commenced.

Although elephants may turn slowly, they possess substantial lifeblood and ample resources. How could they easily abandon the Chinese auto market? Truly ambitious brands will not sit idly by and watch themselves become someone else's "delicacy" on the table; rather, they aspire to continue sharing the spoils in China.

Believe it or not, we'll see.